LL Flooring founder: ‘Need to get it back to the basics’

A sign out front of LL Flooring’s Henrico headquarters. (BizSense file photo)

Earlier this summer, as Thomas Sullivan pushed to change the direction of foundering LL Flooring, he pondered what he might do if he were able to once again hold sway over the company he founded 30 years ago.

In a brief, previously unpublished interview with Richmond BizSense in June, Sullivan explained some of the goals of his pursuit to acquire control of the publicly traded Henrico-based retailer, which he launched as Lumber Liquidators in the mid-1990s but hasn’t helmed in nearly a decade.

“In the last year or so, people in the stores were telling me it was the complete opposite of how we used to run…and the culture had gone away from what we had built,” Sullivan said in the June 6 interview. “I’m just looking to get the culture back. We just need to get it back to the basics of a good product at a good price.”

Sullivan at the time had halted his previously unsuccessful attempts to purchase control of LL Flooring and take it private. Instead, he was locked in a proxy battle to gain seats for him and a few allies on the publicly traded company’s board of directors.

Thomas Sullivan, as seen in a Lumber Liquidators commercial in 2015.

His goal at that point in June was to influence the company as a director in the hopes of ushering in a leadership change and helping it regain its footing in the face of continued losses and stock price in free-fall.

Now, three months later, the story has been turned on its head and Sullivan is on the verge of doing much more than just gaining a few board seats.

LL Flooring filed for Chapter 11 bankruptcy protection on Aug. 11. It hoped the bankruptcy process would buy it time to line up a buyer willing to purchase the bulk of its assets. Several interested parties lined up, including Sullivan’s private equity firm F9 Investments.

However, LL rejected the offers it initially received and announced publicly last week it was pivoting into a full-scale liquidation – meaning it intended to go out of business entirely.

But a few days later it pulled another dramatic pivot. This time it said it wouldn’t go out of business after all and had re-entered negotiations with Sullivan and F9 for a “going-concern” asset sale.

The deal calls for Sullivan to purchase 219 of the chain’s 430 stores for an undisclosed sum. He and F9 would also purchase all of the company’s intellectual property, including its name.

Those terms of the sale, which is subject to bankruptcy court approval, would seem to align with at least some of what Sullivan had in mind for the company when he spoke with BizSense in June.

“I don’t know exactly what needs to be done… (but it has) too many stores, too many people, too much overhead,” he said.

Representatives of Sullivan and F9 did not respond to a request for comment by press time regarding the pending asset purchase.

Sullivan in June recalled some of the history of Lumber Liquidators. He said he opened the company’s first store in Boston on Jan. 5, 1996, after a career as a contractor.

It expanded around the Northeast before eventually making its way to Virginia with a store in Colonial Heights.

The chain grew to more than 300 stores during Sullivan’s tenure, eventually moving its headquarters to Toano, near Williamsburg.

“We started with a beat-up pickup truck, but I always had a dream of a nationwide-type business,” Sullivan said. “It was something special. We just worked out ass off and built a great company.”

Lumber Liquidators went public on the New York Stock Exchange in 2007, a milestone Sullivan recalled fondly.

The old Lumber Liquidators logo.

“The night before we went on the New York Stock Exchange they had a big 300-foot banner with the Lumber Liquidators name and black and yellow (the colors of the company’s logo at the time). It was a kind of a dream come true,” he said.

Sullivan also shared his disdain for a fateful “60 Minutes” exposé in 2015, which claimed the company’s imported products contained unsafe levels of formaldehyde. The fallout from that report and other legal issues at the time sent the company into a steady decline that culminated in with last month’s bankruptcy.

Sullivan, who publicly disputed the damning report at the time and left the company in 2016, said in June, “The damage was done and the short sellers made a lot of money.”

Asked in June what else led to the company’s precarious position, Sullivan questioned the LL’s current leadership, arguing they’ve been more focused on near-term results rather than long-term success.

“People were living quarter to quarter,” he said.

He also questioned the company’s expense controls, including its decision two years ago to move to a new headquarters in the Libbie Mill development in Henrico.

“They keep saying the economy (is to blame). At Lumber Liquidators we went through much worse times than there are now. I don’t think the economy is the problem,” he said.

LL Flooring’s headquarters at Libbie Mill Midtown. (BizSense file photo)

There is one area of the company’s operations on which Sullivan and LL seem to agree. The company said in bankruptcy filings that the LL Flooring brand hasn’t caught on and was “further exasperating the company’s recent financial difficulties.” The name was introduced two years ago to try to shed some of the PR baggage from the “60 Minutes” saga and other issues.

Sullivan feels the same way about the name and said he’d aim to bring back the original Lumber Liquidators flag.

“It got replaced with an unrecognizable logo and unrecognizable name,” he said.

F9’s pending asset purchase is set to be considered in bankruptcy court in Delaware on Sept. 16. The full financial terms of the deal have yet to be disclosed.

F9 previously proposed an asset purchase plan valued at roughly $66 million, through which it would have kept 219 of the chain’s stores and retained 750-1,000 of the company’s 2,000 employees. However, that offer was rejected by LL.

F9 put down an escrow deposit of $4.1 million for this latest deal.

F9 remains LL’s largest shareholder, though those shares are now worth nearly nothing after the bankruptcy. Sullivan is also LL’s biggest landlord, owning several dozen retail spaces that are leased to the company’s stores. He also owns retail chain Cabinets To Go, which he said has around 105 stores and about 600 employees.

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